Of course the rating actions are lagging the market and a lot of pain is already priced into the bonds. Some of Granite’s mezzanine BBB bonds are trading below 20 pence on the pound.

Nonetheless, there will be some psychological damage to the market if a large UK prime mortgage-backed issuer is severely downgraded. It certainly won’t do anything to help revive the primary market for UK RMBS, which some hope is set for a comeback. The good news is that so far the AAA rated bonds have not been placed on watch.

There’s little cheer to be found in S&P’s statement on the rating actions, which casts doubt over recent signs of recovery in the mortgage market, including house prices rises.

“Although we have observed that the more recent upward trends in severe delinquencies have tempered somewhat, at a time where house price indices have registered their first meaningful rises in almost two years, we do not yet consider that either of these trends is sustainable.’’

Granite now has long-term arrears of 4.67 percent, according to S&P, worse than the Rock’s average of 3.92 percent. Thirty-four percent of the Granite mortgages are in negative equity, compared with 39 percent for Northern Rock’s overall book.